A family member has been renting out my house for all last year and I have been paying the rent can I deduct all of this? and not report this as rental income?

Forum|Forum|6 years ago
June 7, 2019
3 replies
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Patrice11

Employee

For determining whether a home is used for rental purposes or for personal use, there are several factors to consider, but the applicable factor in this scenario is whether or not the related family member paid a fair rental price for use of the home.

Generally rental of your property to family members for less than the fair-rental-value may be considered personal use of a property. If they did not pay the "fair market rental price", then the use of the dwelling unit is considered to be personal use by the owner" and you would not report this as income.

If you do not rent your property to make a profit, you can deduct your rental expenses only up to the amount of your rental income. You cannot deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year.

However, if you are renting the house at or above fair market value then you would report the income and expenses.

https://ttlc.intuit.com/replies/3288530

taxhelper

"Generally rental of your property to family members for less than the fair-rental-value may be considered personal use of a property. If they did not pay the "fair market rental price", then the use of the dwelling unit is considered to be personal use by the owner" and you would not report this as income."

I am dealing with this very issue helping a family member and I asked a "tax expert" about it and they said all income is reported regardless. Just curious where I can find support that this income would not need to be reported?

Prestrent

I have a question. I sold my rental and bought another house. My previous house was a 1031 exchange. I wanted this house to be also but the realtor didn’t set it up that way so I have a $350,000 profit. I put it all into the new house. I don’t live in it but I rent it to my daughter way below fair market value. The issue is that her and I are both on the loan and the deed to the house. Would I qualify for a 1031 exchange with those circumstances? If so, I would sue the real estate company because since I didn’t do the exchange, I had to pay back capital gains on my original house and the profit was around $250,000 so my capital gains for last year comes to $130,000. Please help!!!

Carl11_2

Employee

A family member has been renting out my house for all last year and I have been paying the rent

If you own the house, it's impossible for "you" to pay rent to yourself to live in the house you own. Likewise, you can't be paying rent to yourself for someone else to live in a house you own either. That's taking money out of your left pocket that you've already paid taxes on, and putting it in your right pocket so you can pay taxes on that same money again. So can you provide a bit more insight please? Your statement as worded just doesn't make sense.

chocobaby14

Carl - I'm not the OP. BUT, is it true that there's no reporting needed if my 2nd property is being rented by family members for the same price as the mortgage and HOA + insurance? Also, it is definitely less than fair market value. They are just paying for the mortgage, HOA and insurance and utilities they use. I'm not making money off of them. Thank you very much!

Anonymous_

Employee

@chocobaby14

The income should be reported but, per Section 280A(d), every day a dwelling unit is rented at less than a fair rental price is considered a day of personal use by the owner. As a result, the only expenses that are allowed would be mortgage interest, property taxes, and casualty losses on Schedule A.

styopr

Hey, correct me if I'm wrong, but the IRS website is saying this income is taxable, must be reported and is no longer deductible... apparently they eliminated the misc deduction... please correct if wrong....

From IRS website:

The rental payments are taxable.

When your property is not rented with intent to profit, certain expenses are deductible if you itemize your deductions on Schedule A, Itemized Deductions. You can deduct mortgage interest on your main or second home, real estate taxes, and some casualty losses on the appropriate lines of Schedule A.

Under the Tax Cuts and Jobs Act, the remaining expenses, formerly treated as miscellaneous itemized deductions subject to a 2% limitation on Schedule A, are no longer deductible.

Anonymous_

Employee

@styopr wrote:

Hey, correct me if I'm wrong, but the IRS website is saying this income is taxable, must be reported and is no longer deductible... apparently they eliminated the misc deduction... please correct if wrong....

You are not wrong.